Record quarterly production exceeds guidance, leads to increased full-year 2023 outlook
Capital investments in quarter were below guidance
Publishes 2023 Sustainability Report and inaugural Climate Risk and Resilience Report
Highlights
- Announced three
Permian Basin acquisitions adding a combined 53,000 net acres and 150 gross high-value locations (Maple closedOctober 31 ; Henry and Tall City are expected to close in early November) - Reported 3Q-23 net income of
$4.9 million , Adjusted Net Income1 of$95.8 million and cash flows from operating activities of$214.2 million - Generated 3Q-23 Consolidated EBITDAX1 of
$286.5 million and Free Cash Flow1 of$91.3 million - Reported 3Q-23 oil and total production that exceeded the high-end of Company guidance by 1% and 4%, respectively, producing 49.0 thousand barrels of oil per day ("MBO/d") and 101.7 thousand barrels of oil equivalent per day ("MBOE/d"), both Company records
- Reported 3Q-23 capital expenditures below the low-end of guidance, investing
$158.2 million , excluding non-budgeted acquisitions and leasehold expenditures - Fortified balance sheet through issuance of
$900 million par value of senior unsecured notes and 3,162,500 shares of common stock for combined total net proceeds of$1.04 billion
"Vital Energy delivered across the board in the third quarter," stated
"Our success has been fueled by our proven strategy of acquiring and efficiently integrating high-value acquisitions," continued Pigott. "This year we have captured five opportunities that increase our scale in the
1Non-GAAP financial measure; please see supplemental reconciliations of GAAP to non-GAAP financial measures at the end of this release.
Third-Quarter 2023 Financial and Operations Summary
Financial Results. The Company reported net income attributable to common stockholders of
Production. Consistent with preliminary volumes disclosed in October, Vital Energy's third quarter oil and total production set Company records, averaging 48,996 BO/d and 101,746 BOE/d, respectively. Quarterly outperformance was driven by strong productivity from recently completed wells across the Company's assets. Wells completed by Vital Energy on the recently integrated Driftwood and Forge assets are currently outperforming historical oil production results by 7% and 29%, respectively.
Capital Investments. Total capital expenditures, excluding non-budgeted acquisitions and leasehold expenditures, were lower than anticipated at
Operating Expenses. Lease operating expenses ("LOE") during the period were
General and Administrative Expenses. General and administrative ("G&A") expenses, excluding long-term incentive plan ("LTIP") and transaction expenses, for third-quarter 2023 were
Liquidity. At
At
Senior secured credit facility and cash balances reflect the application of the Company's net proceeds of
Sustainability
Vital Energy recently published its 2023 Sustainability Report and an inaugural Climate Risk and Resilience Report. Both reports detail the Company’s performance against its sustainability targets. Two Company targets (Scope 1 GHG emissions intensity and methane emissions reductions) were achieved as of year-end 2022, three years ahead of schedule.
Vital Energy was the first Permian operator to receive the third-party TrustWell certification for responsible operations, placing the Company in the top-quartile of
Fourth-Quarter 2023 Guidance
Production. The Company increased its fourth-quarter 2023 guidance for both total and oil production from those initially provided with the acquisition announcements in September. Total production guidance was increased by 3.8 MBOE/d (previously 98.0 - 102.0 MBOE/d), comprised of 0.9 MBOE/d for increased productivity assumptions and 2.9 MBOE/d for earlier transaction closing dates. Oil production guidance was increased by 1.4 MBO/d (previously 46.5 - 49.5 MBO/d), comprised of 0.3 MBO/d for increased productivity and 1.1 MBO/d for earlier transaction closing dates.
Capital Investments. Vital Energy updated its fourth-quarter 2023 capital investment guidance to
The table below reflects the Company's guidance for production and capital investments for fourth-quarter 2023.
4Q-23E | ||
Total production (MBOE/d) | 101.8 - 105.8 | |
Oil production (MBO/d) | 47.9 - 50.9 | |
Incurred capital expenditures, excluding non-budgeted acquisitions ($ MM) | ||
The table below reflects the Company's guidance for select revenue and expense items for fourth-quarter 2023.
4Q-23E | ||
Average sales price realizations (excluding derivatives): | ||
Oil (% of WTI) | 101% | |
NGL (% of WTI) | 16% | |
Natural gas (% of | 44% | |
Net settlements received (paid) for matured commodity derivatives ($ MM): | ||
Oil | ||
NGL | ||
Natural gas | ||
Selected average costs & expenses: | ||
Lease operating expenses ($/BOE) | ||
Production and ad valorem taxes (% of oil, NGL and natural gas sales revenues) | 6.50% | |
Oil transportation and marketing expenses ($/BOE) | ||
Gas gathering, processing and transportation expenses ($/BOE) | ||
General and administrative expenses (excluding LTIP and transaction expenses, $/BOE) | ||
General and administrative expenses (LTIP cash, $/BOE) | ||
General and administrative expenses (LTIP non-cash, $/BOE) | ||
Depletion, depreciation and amortization ($/BOE) | ||
2023 Outlook
Production. The Company increased its outlook for full-year 2023 production to incorporate higher third-quarter volumes, increased expectations for fourth-quarter 2023 well productivity, and production associated with revised closing date assumptions for recently announced acquisitions.
The table below reflects the Company’s revised outlook for full-year 2023. Volumes associated with recent acquisitions reflect an
Previous Guidance1 | Production | Acquisitions Production | Updated Guidance | |||||
Total production (MBOE/d) | 87.0 - 89.0 | 1.7 | 4.4 | 93.6 - 94.6 | ||||
Oil production (MBO/d) | 41.9 - 43.4 | 0.6 | 2.1 | 45.0 - 45.7 | ||||
Capital Investments. Vital Energy lowered its full-year 2023 capital investment guidance to
The table below reflects the Company’s revised outlook for full-year 2023 for capital investments.
Previous Guidance1 | Updated Guidance | |||||||||
Capital expenditures, excluding non-budgeted acquisitions ($ MM) |
¹As of
Conference Call Details
Vital Energy plans to host a conference call at
About Vital Energy
Vital Energy, Inc. is an independent energy company with headquarters in
Additional information about Vital Energy may be found on its website at www.vitalenergy.com.
Forward-Looking Statements
This press release and any oral statements made regarding the contents of this release, including in the conference call referenced herein, contain forward-looking statements as defined under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities that Vital Energy assumes, plans, expects, believes, intends, projects, indicates, enables, transforms, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. Such statements are not guarantees of future performance and involve risks, assumptions and uncertainties.
General risks relating to Vital Energy include, but are not limited to, continuing and worsening inflationary pressures and associated changes in monetary policy that may cause costs to rise; changes in domestic and global production, supply and demand for commodities, including as a result of actions by the
The
This press release and any accompanying disclosures include financial measures that are not in accordance with generally accepted accounting principles ("GAAP"), such as Free Cash Flow, Adjusted Net Income and Consolidated EBITDAX. While management believes that such measures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with GAAP. For a reconciliation of such non-GAAP financial measures to the nearest comparable measure in accordance with GAAP, please see the supplemental financial information at the end of this press release.
Unless otherwise specified, references to "average sales price" refer to average sales price excluding the effects of the Company's derivative transactions.
All amounts, dollars and percentages presented in this press release are rounded and therefore approximate.
Vital Energy, Inc. Selected operating data | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Sales volumes: | ||||||||||||||||
Oil (MBbl) | 4,507 | 3,219 | 12,011 | 10,536 | ||||||||||||
NGL (MBbl) | 2,421 | 2,034 | 6,320 | 6,128 | ||||||||||||
Natural gas (MMcf) | 14,593 | 12,430 | 38,760 | 37,447 | ||||||||||||
Oil equivalent (MBOE)(1)(2) | 9,361 | 7,324 | 24,791 | 22,905 | ||||||||||||
Average daily oil equivalent sales volumes (BOE/d)(2) | 101,746 | 79,613 | 90,809 | 83,901 | ||||||||||||
Average daily oil sales volumes (Bbl/d)(2) | 48,996 | 34,994 | 43,997 | 38,594 | ||||||||||||
Average sales prices(2): | ||||||||||||||||
Oil ($/Bbl)(3) | $ | 83.23 | $ | 96.83 | $ | 78.34 | $ | 101.51 | ||||||||
NGL ($/Bbl)(3) | $ | 15.82 | $ | 29.20 | $ | 15.38 | $ | 32.16 | ||||||||
Natural gas ($/Mcf)(3) | $ | 1.46 | $ | 5.94 | $ | 1.25 | $ | 4.78 | ||||||||
Average sales price ($/BOE)(3) | $ | 46.44 | $ | 60.75 | $ | 43.82 | $ | 63.11 | ||||||||
Oil, with commodity derivatives ($/Bbl)(4) | $ | 78.62 | $ | 71.09 | $ | 76.69 | $ | 71.03 | ||||||||
NGL, with commodity derivatives ($/Bbl)(4) | $ | 15.82 | $ | 24.47 | $ | 15.38 | $ | 25.93 | ||||||||
Natural gas, with commodity derivatives ($/Mcf)(4) | $ | 1.32 | $ | 3.35 | $ | 1.40 | $ | 3.05 | ||||||||
Average sales price, with commodity derivatives ($/BOE)(4) | $ | 44.01 | $ | 43.74 | $ | 43.27 | $ | 44.60 | ||||||||
Selected average costs and expenses per BOE sold(2): | ||||||||||||||||
Lease operating expenses | $ | 7.05 | $ | 6.04 | $ | 7.02 | $ | 5.55 | ||||||||
Production and ad valorem taxes | 2.92 | 3.96 | 2.80 | 3.91 | ||||||||||||
Oil transportation and marketing expenses | 1.15 | 1.81 | 1.31 | 1.70 | ||||||||||||
General and administrative (excluding LTIP and transaction expenses) | 2.16 | 2.02 | 2.32 | 1.82 | ||||||||||||
Total selected operating expenses | $ | 13.28 | $ | 13.83 | $ | 13.45 | $ | 12.98 | ||||||||
General and administrative (LTIP): | ||||||||||||||||
LTIP cash | $ | 0.29 | $ | (0.52 | ) | $ | 0.20 | $ | 0.16 | |||||||
LTIP non-cash | $ | 0.28 | $ | 0.11 | $ | 0.30 | $ | 0.24 | ||||||||
General and administrative (transaction expenses) | $ | 0.33 | $ | — | $ | 0.13 | $ | — | ||||||||
Depletion, depreciation and amortization | $ | 12.87 | $ | 10.23 | $ | 12.53 | $ | 9.89 |
_______________________________________________________________________________
(1) BOE is calculated using a conversion rate of six Mcf per one Bbl.
(2) The numbers presented are calculated based on actual amounts and may not recalculate using the rounded numbers presented in the table above.
(3) Price reflects the average of actual sales prices received when control passes to the purchaser/customer adjusted for quality, certain transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point.
(4) Price reflects the after-effects of the Company's commodity derivative transactions on its average sales prices. The Company's calculation of such after-effects includes settlements of matured commodity derivatives during the respective periods.
Vital Energy, Inc. Consolidated balance sheets | ||||||||
(in thousands, except share data) | ||||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 589,695 | $ | 44,435 | ||||
Accounts receivable, net | 199,838 | 163,369 | ||||||
Derivatives | 3,775 | 24,670 | ||||||
Other current assets | 20,900 | 13,317 | ||||||
Total current assets | 814,208 | 245,791 | ||||||
Property and equipment: | ||||||||
Oil and natural gas properties, full cost method: | ||||||||
Evaluated properties | 10,512,608 | 9,554,706 | ||||||
Unevaluated properties not being depleted | 199,490 | 46,430 | ||||||
Less: accumulated depletion and impairment | (7,616,830 | ) | (7,318,399 | ) | ||||
Oil and natural gas properties, net | 3,095,268 | 2,282,737 | ||||||
Midstream and other fixed assets, net | 129,115 | 127,803 | ||||||
Property and equipment, net | 3,224,383 | 2,410,540 | ||||||
Derivatives | 27,163 | 24,363 | ||||||
Operating lease right-of-use assets | 116,634 | 23,047 | ||||||
Deferred income taxes | 220,382 | — | ||||||
Other noncurrent assets, net | 23,482 | 22,373 | ||||||
Total assets | $ | 4,426,252 | $ | 2,726,114 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 106,376 | $ | 102,516 | ||||
Accrued capital expenditures | 74,149 | 48,378 | ||||||
Undistributed revenue and royalties | 165,027 | 160,023 | ||||||
Derivatives | 106,767 | 5,960 | ||||||
Operating lease liabilities | 47,399 | 15,449 | ||||||
Other current liabilities | 71,984 | 82,950 | ||||||
Total current liabilities | 571,702 | 415,276 | ||||||
Long-term debt, net | 1,926,966 | 1,113,023 | ||||||
Derivatives | 5,885 | — | ||||||
Asset retirement obligations | 75,416 | 70,366 | ||||||
Operating lease liabilities | 66,366 | 9,435 | ||||||
Other noncurrent liabilities | 6,853 | 7,268 | ||||||
Total liabilities | 2,653,188 | 1,615,368 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Preferred stock, | — | — | ||||||
Common stock, | 218 | 168 | ||||||
Additional paid-in capital | 3,002,709 | 2,754,085 | ||||||
Accumulated deficit | (1,229,863 | ) | (1,643,507 | ) | ||||
Total stockholders' equity | 1,773,064 | 1,110,746 | ||||||
Total liabilities and stockholders' equity | $ | 4,426,252 | $ | 2,726,114 |
Vital Energy, Inc. Consolidated statements of operations | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
(in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Revenues: | ||||||||||||||||
Oil sales | $ | 375,166 | $ | 311,740 | $ | 940,982 | $ | 1,069,542 | ||||||||
NGL sales | 38,303 | 59,377 | 97,196 | 197,037 | ||||||||||||
Natural gas sales | 21,234 | 73,831 | 48,260 | 179,026 | ||||||||||||
Sales of purchased oil | 3 | 18,371 | 14,192 | 106,030 | ||||||||||||
Other operating revenues | 808 | 795 | 2,453 | 5,030 | ||||||||||||
Total revenues | 435,514 | 464,114 | 1,103,083 | 1,556,665 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Lease operating expenses | 66,040 | 44,246 | 173,939 | 127,136 | ||||||||||||
Production and ad valorem taxes | 27,360 | 29,024 | 69,498 | 89,512 | ||||||||||||
Oil transportation and marketing expenses | 10,795 | 13,285 | 32,391 | 39,022 | ||||||||||||
Gas gathering, processing and transportation expenses | 371 | — | 371 | — | ||||||||||||
Costs of purchased oil | 101 | 18,772 | 14,856 | 108,516 | ||||||||||||
General and administrative | 28,641 | 11,857 | 73,053 | 50,800 | ||||||||||||
Organizational restructuring expenses | — | 10,420 | — | 10,420 | ||||||||||||
Depletion, depreciation and amortization | 120,499 | 74,928 | 310,618 | 226,555 | ||||||||||||
Other operating expenses, net | 1,703 | 2,616 | 4,538 | 6,973 | ||||||||||||
Total costs and expenses | 255,510 | 205,148 | 679,264 | 658,934 | ||||||||||||
Gain on disposal of assets, net | 149 | 4,282 | 540 | 4,952 | ||||||||||||
Operating income | 180,153 | 263,248 | 424,359 | 902,683 | ||||||||||||
Non-operating income (expense): | ||||||||||||||||
Gain (loss) on derivatives, net | (135,321 | ) | 100,748 | (132,875 | ) | (290,995 | ) | |||||||||
Interest expense | (39,305 | ) | (30,967 | ) | (99,388 | ) | (96,251 | ) | ||||||||
Gain (loss) on extinguishment of debt, net | — | 553 | — | (245 | ) | |||||||||||
Other income, net | 1,739 | 173 | 3,697 | 543 | ||||||||||||
Total non-operating income (expense), net | (172,887 | ) | 70,507 | (228,566 | ) | (386,948 | ) | |||||||||
Income before income taxes | 7,266 | 333,755 | 195,793 | 515,735 | ||||||||||||
Income tax benefit (expense): | ||||||||||||||||
Current | (464 | ) | 960 | (2,298 | ) | (4,771 | ) | |||||||||
Deferred | (1,909 | ) | 2,808 | 220,149 | 2,324 | |||||||||||
Total income tax benefit (expense) | (2,373 | ) | 3,768 | 217,851 | (2,447 | ) | ||||||||||
Net income | $ | 4,893 | $ | 337,523 | $ | 413,644 | $ | 513,288 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.27 | $ | 20.27 | $ | 23.44 | $ | 30.64 | ||||||||
Diluted | $ | 0.26 | $ | 20.08 | $ | 23.32 | $ | 30.26 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 18,455 | 16,650 | 17,646 | 16,750 | ||||||||||||
Diluted | 18,569 | 16,809 | 17,740 | 16,963 |
Vital Energy, Inc. Consolidated statements of cash flows | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 4,893 | $ | 337,523 | $ | 413,644 | $ | 513,288 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Share-settled equity-based compensation, net | 2,937 | 1,638 | 8,402 | 6,295 | ||||||||||||
Depletion, depreciation and amortization | 120,499 | 74,928 | 310,618 | 226,555 | ||||||||||||
Gain on disposal of assets, net | (149 | ) | (4,282 | ) | (540 | ) | (4,952 | ) | ||||||||
Mark-to-market on derivatives: | ||||||||||||||||
(Gain) loss on derivatives, net | 135,321 | (100,748 | ) | 132,875 | 290,995 | |||||||||||
Settlements paid for matured derivatives, net | (22,760 | ) | (124,289 | ) | (14,320 | ) | (423,668 | ) | ||||||||
(Gain) loss on extinguishment of debt, net | — | (553 | ) | — | 245 | |||||||||||
Deferred income tax (benefit) expense | 1,909 | (2,808 | ) | (220,149 | ) | (2,324 | ) | |||||||||
Other, net | 3,704 | 10,052 | 8,851 | 25,932 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (56,167 | ) | 42,891 | (38,807 | ) | (11,069 | ) | |||||||||
Other current assets | (1,359 | ) | 730 | (9,589 | ) | 7,574 | ||||||||||
Other noncurrent assets, net | (324 | ) | (21 | ) | 1,266 | 1,450 | ||||||||||
Accounts payable and accrued liabilities | 21,678 | 23,589 | 4,243 | 15,084 | ||||||||||||
Undistributed revenue and royalties | (1,648 | ) | (8,104 | ) | 199 | 131,356 | ||||||||||
Other current liabilities | 5,801 | (60,918 | ) | (12,846 | ) | (41,362 | ) | |||||||||
Other noncurrent liabilities | (126 | ) | (7,013 | ) | (4,625 | ) | (14,697 | ) | ||||||||
Net cash provided by operating activities | 214,209 | 182,615 | 579,222 | 720,702 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Acquisitions of oil and natural gas properties, net | (13,144 | ) | (3,694 | ) | (540,129 | ) | (5,581 | ) | ||||||||
Capital expenditures: | ||||||||||||||||
Oil and natural gas properties | (145,823 | ) | (143,374 | ) | (455,046 | ) | (432,124 | ) | ||||||||
Midstream and other fixed assets | (3,793 | ) | (5,312 | ) | (10,692 | ) | (10,264 | ) | ||||||||
Proceeds from dispositions of capital assets, net of selling costs | 91 | 890 | 2,343 | 2,939 | ||||||||||||
Settlements received for contingent consideration | 47 | — | 2,082 | 1,555 | ||||||||||||
Net cash used in investing activities | (162,622 | ) | (151,490 | ) | (1,001,442 | ) | (443,475 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Borrowings on Senior Secured Credit Facility | 35,000 | 200,000 | 630,000 | 335,000 | ||||||||||||
Payments on Senior Secured Credit Facility | (610,000 | ) | (160,000 | ) | (700,000 | ) | (400,000 | ) | ||||||||
Issuance of senior unsecured notes | 897,710 | — | 897,710 | — | ||||||||||||
Extinguishment of debt | — | (149,985 | ) | — | (182,319 | ) | ||||||||||
Proceeds from issuance of common stock, net of offering costs | 161,003 | — | 161,003 | — | ||||||||||||
Share repurchases | — | (17,515 | ) | — | (26,586 | ) | ||||||||||
Stock exchanged for tax withholding | (212 | ) | (853 | ) | (3,056 | ) | (7,442 | ) | ||||||||
Payments for debt issuance costs | (16,331 | ) | (377 | ) | (16,331 | ) | (1,725 | ) | ||||||||
Other, net | (758 | ) | — | (1,846 | ) | (1,012 | ) | |||||||||
Net cash provided by (used in) financing activities | 466,412 | (128,730 | ) | 967,480 | (284,084 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 517,999 | (97,605 | ) | 545,260 | (6,857 | ) | ||||||||||
Cash, cash equivalents and restricted cash, beginning of period | 71,696 | 147,546 | 44,435 | 56,798 | ||||||||||||
Cash and cash equivalents, end of period | $ | 589,695 | $ | 49,941 | $ | 589,695 | $ | 49,941 |
Vital Energy, Inc. Supplemental reconciliations of GAAP to non-GAAP financial measures |
Non-GAAP financial measures
The non-GAAP financial measures of Free Cash Flow, Adjusted Net Income, Consolidated EBITDAX, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Furthermore, these non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP measures of liquidity or financial performance, but rather should be considered in conjunction with GAAP measures, such as net income or loss, operating income or loss or cash flows from operating activities.
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities (GAAP) before net changes in operating assets and liabilities and non-budgeted acquisition costs, less incurred capital expenditures, excluding non-budgeted acquisition costs. Management believes Free Cash Flow is useful to management and investors in evaluating operating trends in its business that are affected by production, commodity prices, operating costs and other related factors. There are significant limitations to the use of Free Cash Flow as a measure of performance, including the lack of comparability due to the different methods of calculating Free Cash Flow reported by different companies.
The following table presents a reconciliation of net cash provided by operating activities (GAAP) to Free Cash Flow (non-GAAP) for the periods presented:
Three months ended | Nine months ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net cash provided by operating activities | $ | 214,209 | $ | 182,615 | $ | 579,222 | $ | 720,702 | ||||||||
Less: | ||||||||||||||||
Net changes in operating assets and liabilities | (32,145 | ) | (8,846 | ) | (60,159 | ) | 88,336 | |||||||||
General and administrative (transaction expenses) | (3,120 | ) | — | (3,120 | ) | — | ||||||||||
Cash flows from operating activities before net changes in operating assets and liabilities and non-budgeted acquisition costs | 249,474 | 191,461 | 642,501 | 632,366 | ||||||||||||
Less incurred capital expenditures, excluding non-budgeted acquisition costs: | ||||||||||||||||
Oil and natural gas properties(1) | 154,865 | 135,304 | 483,329 | 439,168 | ||||||||||||
Midstream and other fixed assets(1) | 3,321 | 4,796 | 11,090 | 9,794 | ||||||||||||
Total incurred capital expenditures, excluding non-budgeted acquisition costs | 158,186 | 140,100 | 494,419 | 448,962 | ||||||||||||
Free Cash Flow (non-GAAP) | $ | 91,288 | $ | 51,361 | $ | 148,082 | $ | 183,404 |
_____________________________________________________________________________
(1) Includes capitalized share-settled equity-based compensation and asset retirement costs.
Adjusted Net Income
Adjusted Net Income is a non-GAAP financial measure that the Company defines as net income or loss (GAAP) plus adjustments for mark-to-market on derivatives, premiums paid or received for commodity derivatives that matured during the period, impairment expense, gains or losses on disposal of assets, income taxes, other non-recurring income and expenses and adjusted income tax expense. Management believes Adjusted Net Income helps investors in the oil and natural gas industry to measure and compare the Company's performance to other oil and natural gas companies by excluding from the calculation items that can vary significantly from company to company depending upon accounting methods, the book value of assets and other non-operational factors.
The following table presents a reconciliation of net income (GAAP) to Adjusted Net Income (non-GAAP) for the periods presented:
Three months ended | Nine months ended | |||||||||||||||
(in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net income | $ | 4,893 | $ | 337,523 | $ | 413,644 | $ | 513,288 | ||||||||
Plus: | ||||||||||||||||
Mark-to-market on derivatives: | ||||||||||||||||
(Gain) loss on derivatives, net | 135,321 | (100,748 | ) | 132,875 | 290,995 | |||||||||||
Settlements paid for matured derivatives, net | (22,760 | ) | (124,611 | ) | (13,740 | ) | (423,990 | ) | ||||||||
Settlements received for contingent consideration | 47 | 322 | 1,502 | 1,877 | ||||||||||||
Organizational restructuring expenses | — | 10,420 | — | 10,420 | ||||||||||||
Gain on disposal of assets, net | (149 | ) | (4,282 | ) | (540 | ) | (4,952 | ) | ||||||||
(Gain) loss on extinguishment of debt, net | — | (553 | ) | — | 245 | |||||||||||
Income tax (benefit) expense | 2,373 | (3,768 | ) | (217,851 | ) | 2,447 | ||||||||||
General and administrative (transaction expenses) | 3,120 | — | 3,120 | — | ||||||||||||
Adjusted income before adjusted income tax expense | 122,845 | 114,303 | 319,010 | 390,330 | ||||||||||||
Adjusted income tax expense(1) | (27,026 | ) | (25,147 | ) | (70,182 | ) | (85,873 | ) | ||||||||
Adjusted Net Income (non-GAAP) | $ | 95,819 | $ | 89,156 | $ | 248,828 | $ | 304,457 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.27 | $ | 20.27 | $ | 23.44 | $ | 30.64 | ||||||||
Diluted | $ | 0.26 | $ | 20.08 | $ | 23.32 | $ | 30.26 | ||||||||
Adjusted Net Income per common share: | ||||||||||||||||
Basic | $ | 5.19 | $ | 5.35 | $ | 14.10 | $ | 18.18 | ||||||||
Diluted | $ | 5.16 | $ | 5.30 | $ | 14.03 | $ | 17.95 | ||||||||
Adjusted diluted | $ | 5.16 | $ | 5.30 | $ | 14.03 | $ | 17.95 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 18,455 | 16,650 | 17,646 | 16,750 | ||||||||||||
Diluted | 18,569 | 16,809 | 17,740 | 16,963 | ||||||||||||
Adjusted diluted | 18,569 | 16,809 | 17,740 | 16,963 |
_______________________________________________________________________________
(1) Adjusted income tax expense is calculated by applying a statutory tax rate of 22% for each of the periods ended
Consolidated EBITDAX
Consolidated EBITDAX is a non-GAAP financial measure defined in the Company's Senior Secured Credit Facility as net income or loss (GAAP) plus adjustments for share-settled equity-based compensation, depletion, depreciation and amortization, impairment expense, gains or losses on disposal of assets, mark-to-market on derivatives, accretion expense, interest expense, income taxes and other non-recurring income and expenses. Consolidated EBITDAX provides no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, working capital movement or tax position. Consolidated EBITDAX does not represent funds available for future discretionary use because it excludes funds required for debt service, capital expenditures, working capital, income taxes, franchise taxes and other commitments and obligations. However, management believes Consolidated EBITDAX is useful to an investor because this measure:
- is used by investors in the oil and natural gas industry to measure a company's operating performance without regard to items that can vary substantially from company to company depending upon accounting methods, the book value of assets, capital structure and the method by which assets were acquired, among other factors;
- helps investors to more meaningfully evaluate and compare the results of the Company's operations from period to period by removing the effect of the Company's capital structure from the Company's operating structure; and
- is used by management for various purposes, including (i) as a measure of operating performance, (ii) as a measure of compliance under the Senior Secured Credit Facility, (iii) in presentations to the board of directors and (iv) as a basis for strategic planning and forecasting.
There are significant limitations to the use of Consolidated EBITDAX as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect the Company's net income or loss and the lack of comparability of results of operations to different companies due to the different methods of calculating Consolidated EBITDAX, or similarly titled measures, reported by different companies. The Company is subject to financial covenants under the Senior Secured Credit Facility, one of which establishes a maximum permitted ratio of Net Debt, as defined in the Senior Secured Credit Facility, to Consolidated EBITDAX. See Note 7 in the 2022 Annual Report for additional discussion of the financial covenants under the Senior Secured Credit Facility. Additional information on Consolidated EBITDAX can be found in the Company's Tenth Amendment to the Senior Secured Credit Facility, as filed with the
The following table presents a reconciliation of net income (GAAP) to Consolidated EBITDAX (non-GAAP) for the periods presented:
Three months ended | Nine months ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net income | $ | 4,893 | $ | 337,523 | $ | 413,644 | $ | 513,288 | ||||||||
Plus: | ||||||||||||||||
Share-settled equity-based compensation, net | 2,937 | 1,638 | 8,402 | 6,295 | ||||||||||||
Depletion, depreciation and amortization | 120,499 | 74,928 | 310,618 | 226,555 | ||||||||||||
Organizational restructuring expenses | — | 10,420 | — | 10,420 | ||||||||||||
Gain on disposal of assets, net | (149 | ) | (4,282 | ) | (540 | ) | (4,952 | ) | ||||||||
Mark-to-market on derivatives: | ||||||||||||||||
(Gain) loss on derivatives, net | 135,321 | (100,748 | ) | 132,875 | 290,995 | |||||||||||
Settlements paid for matured derivatives, net | (22,760 | ) | (124,611 | ) | (13,740 | ) | (423,990 | ) | ||||||||
Settlements received for contingent consideration | 47 | 322 | 1,502 | 1,877 | ||||||||||||
Accretion expense | 913 | 954 | 2,715 | 2,946 | ||||||||||||
Interest expense | 39,305 | 30,967 | 99,388 | 96,251 | ||||||||||||
(Gain) loss extinguishment of debt, net | — | (553 | ) | — | 245 | |||||||||||
Income tax (benefit) expense | 2,373 | (3,768 | ) | (217,851 | ) | 2,447 | ||||||||||
General and administrative (transaction expenses) | 3,120 | — | 3,120 | — | ||||||||||||
Consolidated EBITDAX (non-GAAP) | $ | 286,499 | $ | 222,790 | $ | 740,133 | $ | 722,377 | ||||||||
The following table presents a reconciliation of net cash provided by operating activities (GAAP) to Consolidated EBITDAX (non-GAAP) for the periods presented:
Three months ended | Nine months ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net cash provided by operating activities | $ | 214,209 | $ | 182,615 | $ | 579,222 | $ | 720,702 | ||||||||
Plus: | ||||||||||||||||
Interest expense | 39,305 | 30,967 | 99,388 | 96,251 | ||||||||||||
Organizational restructuring expenses | — | 10,420 | — | 10,420 | ||||||||||||
Current income tax (benefit) expense | 464 | (960 | ) | 2,298 | 4,771 | |||||||||||
Net changes in operating assets and liabilities | 32,145 | 8,846 | 60,159 | (88,336 | ) | |||||||||||
General and administrative (transaction expenses) | 3,120 | — | 3,120 | — | ||||||||||||
Settlements received for contingent consideration | 47 | 322 | 1,502 | 1,877 | ||||||||||||
Other, net | (2,791 | ) | (9,420 | ) | (5,556 | ) | (23,308 | ) | ||||||||
Consolidated EBITDAX (non-GAAP) | $ | 286,499 | $ | 222,790 | $ | 740,133 | $ | 722,377 | ||||||||
Investor Contact:
918.858.5504
ir@vitalenergy.com
Source: Vital Energy, Inc.
2023 GlobeNewswire, Inc., source